Late start but hopefully not too late.

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Topic Author
Idontknow
Posts: 2
Joined: Sun Feb 10, 2019 8:57 pm

Late start but hopefully not too late.

Post by Idontknow » Sun Feb 10, 2019 9:47 pm

First post but I've been lurking for a while. Mainly when I was searching for a new book to read.

I've got a great career going, currently about half way through and wasn't the most responsible with my income/investments until about two years ago. Here's what I've got going:

Basics:
Gross income: $150k +/- depending on overtime. Just had my highest year of $187k.
Debt: None
Tax status: Single, no dependents.
State: AK
Age: 36

I'm 14 years into a career at 36 years-old and plan to work until 50. I'm not in a hurry to retire, I love my job and am not one of those folk that can't wait to not do it anymore. At 50, I'll have a pension of roughly $150k. That's the great news.

Up until just a couple years back, my other retirement accounts, a 401(a) and a 457(b) Deferred Compensation account were invested poorly. When I was first hired, the default location for your investments was into a Long-Term balanced Trust. Needless to explain here, it's performance was low to say the least compared to other options. Not only was I not invested very well, I also wasn't contributing to the retirement options that I had available to me that weren't required. I wasn't contributing to the 457 and I also found out that I have another option available for a third voluntary account.

In my 401, I currently only have about $235k in my 401 and the investments are allocated 80/20 to a Russell 3000 fund with ER of .01% and a Bond fund that follows the same index as Vanguard's VBTLX. My available bond fund's ER is .04%. This account is funded with 7.5% of my income throughout the year. I also get a 5.65% employee match until I hit the social security cap each year. After that amount, only my contributions are added to the account.

In my 457, I have approximately $65k in the same two funds listed above but it's a 90/10 ratio. I now currently contribute the maximum amount allowed to this account ($19k in 2019) via dollar cost averaging from bi-monthly paychecks throughout the year.

A third account is available for my retirement system where I'm able to contribute 5% of my gross paycheck to it in post-tax funds. I have no control over where it's invested but I get a guaranteed 4.5% return on it. I know that's not as high as other investments but I like the guarantee to help balance out the volatility of other investments.

I've also started a Backdoor Roth with Vanguard last year and have made my contributions for 2018 & 2019 to it. All of it is invested in VTSAX.

I have a taxable account with Vanguard that I have $1,000/month contributed. This is also all in VTSAX.

Finally, I have a $500/month contribution going to Fundrise. This started as an experiment six months ago and I'm just seeing how it goes. So far, I like that it's been balancing out some of the volatility of other accounts as well.

All in, I feel that is is very simple but overall, really not that bad of a setup for where I'm at in my life. It's absolutely gut-wrenching to look at what my accounts would be if I had everything setup this way from when I was originally hired in 2005 instead of just getting a handle on it a couple years back. I'm trying to keep the past mistakes in mind so I don't forget about them, however, I'm also trying not to dwell on them.

Am I being overly simple with my investments or are there other options out there that I should look into? (I'm sure there are which is why I'm consulting you guru's.) With another 14 years to go of work plus, very likely not going draw from my investment accounts until many years post-retirement because of a decent pension, I'm still fairly well off aren't I?

Also, I plan on rolling all of my retirement accounts over to Vanguard after retirement and will only draw the pension from the state.

Thank you for your help!

User avatar
Watty
Posts: 15209
Joined: Wed Oct 10, 2007 3:55 pm

Re: Late start but hopefully not too late.

Post by Watty » Sun Feb 10, 2019 10:38 pm

Idontknow wrote:
Sun Feb 10, 2019 9:47 pm
....or are there other options out there that I should look into?
I might have missed it but what is your housing situation?

Do you plan to stay in Alaska when you retire?

Owning a home is not right for everyone but at least for me having a paid off house when I retired made my numbers work a lot better.

If you will not have a paid off house when you retire you might consider having a housing fund to allow you to buy one for cash at some point in the future when the time is right for you to buy a home.

ExitStageLeft
Posts: 1105
Joined: Sat Jan 20, 2018 4:02 pm

Re: Late start but hopefully not too late.

Post by ExitStageLeft » Mon Feb 11, 2019 2:15 pm

Welcome to the forum!

There is nothing wrong with simple. The key is to diversify and keep costs low. if you're getting that then you are good to go.

The 457b will greatly simplify your life if you end up retiring in your 50s. It allows you to access the deferred income without penalty prior to ag 59.5. As such you may want to keep it in the 457b program until you reach age 59. You've got a few years yet to figure that out.

Don't fret the past bad choices. All of us, or at least most I suppose, have been there. You should look forwards and to help you do that you should write up an investment policy statement. It's a great way to formalize your decision process affecting the most basic of portfolio factors: what is your asset allocation between stocks and bonds?

Edit to add: My thoughts on an IPS weren't very clear. The idea is to lay out if and how you want to shift to a more conservative allocation as your retirement gets nearer.

alaskantraveler
Posts: 223
Joined: Wed May 11, 2016 12:26 pm

Re: Late start but hopefully not too late.

Post by alaskantraveler » Tue Feb 12, 2019 12:15 pm

I have access to a 457 as well. You have access to $19k in the 401 and $19k in the 457 each per year. So if you have the ability to max out both of these, I would do this first before contributing to any after tax accounts.

Topic Author
Idontknow
Posts: 2
Joined: Sun Feb 10, 2019 8:57 pm

Re: Late start but hopefully not too late.

Post by Idontknow » Tue Feb 12, 2019 12:50 pm

Watty wrote:
Sun Feb 10, 2019 10:38 pm
Idontknow wrote:
Sun Feb 10, 2019 9:47 pm
....or are there other options out there that I should look into?
I might have missed it but what is your housing situation?

Do you plan to stay in Alaska when you retire?

Owning a home is not right for everyone but at least for me having a paid off house when I retired made my numbers work a lot better.

If you will not have a paid off house when you retire you might consider having a housing fund to allow you to buy one for cash at some point in the future when the time is right for you to buy a home.
I’m definitely going to stay in Alaska. Good call on the housing, I forgot to mention that. I’ve been living in housing provided by my work for the last two years. I just moved towns and bought a condo. I had a good savings and put down a large down payment so now, the only debt I have is 140k on a 15 year loan that I plan to pay off much quicker than that. Personal preference on the big debate for me is to have a paid off home. Your savings go so much further when you only have basic utilities for bills each month.

My overal ratio is between 80/20 & 90/10 not including cash set aside.

User avatar
Watty
Posts: 15209
Joined: Wed Oct 10, 2007 3:55 pm

Re: Late start but hopefully not too late.

Post by Watty » Tue Feb 12, 2019 4:10 pm

You are doing fine and simple is good especially with only being 14 years from having the pension.

Just a few comments.

It was not really clear but it looks like your asset allocation is a bit less than 20% bonds. That is on the aggressive side for someone that is is 14 years from retirement who does not have much need to be aggressive.

I could be mistaken but it does not look like you have any international stocks so you should add some for diversification.

You have a lot riding on the pension. Be sure to also look into what disability insurance you have. The problem is that if something happens and you are disabled the disability insurance might only pay until you are 65 and then your pension could be greatly reduced if it does not accrue while you are out on disability. The details vary wildly with the details of the plans.

It was not clear if you would get Social Security in addition to the pension. You are in such good shape that it probably does not matter a lot but when you crunch your numbers be sure to include that.

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